Ukraine Labor Market Updates 2016

Editorial Team Business

Over the last several years, as a result of the unstable political and economic situation in Ukraine, salaries levels and consuming capacity of Ukrainian people have dropped significantly.

According to the report published by the State Statistic Service of Ukraine as of June, 2016, average monthly salary in Ukraine is less than UAH 5,000 (approx. USD 200). The highest average salary level is Kyiv (capital of Ukraine) amounting to approx. UAH 8,000 (around USD 320). In other big cities of Ukraine like Dnipro, Kharkiv, Odessa and Lviv, the average monthly salary is approx. UAH 4,000-5,000.

A word of caution here. The above-mentioned figures cannot be taken as very exact because of unofficial “cash salaries” in Ukraine (so called “salary in envelope” -a wide-spread practice in Ukraine to avoid paying taxes). Even then, the average actual salary is not much higher.

The only bright spot in terms of salary in Ukraine is the IT sector. Salaries for IT professionals are considerably higher and depending on the skill-set, range from $1000 – $5000. The primary reason for this is that most of the IT work in Ukraine is being done for clients from western countries in an IT outsourcing model. IT professionals from Ukraine are well-known for their top-notch software development skills and are in high-demand overseas.

In Ukraine, the minimum salary level is prescribed in the annual budget law. At present (August 2016), the minimum monthly salary is UAH 1450 (approximately USD 60):

  • from 01.01.2016 – 30.04.2016 UAH 1378
  • from 01.05.2016 – 30.11.2016 UAH 1450
  • from 01.12.2016 – 31.12.2016 UAH 1600

Even though prices in Ukraine for many goods and services are lower than in other countries of the world (including utilities, accommodation, local food products and public transport), this amount is absolutely insufficient to survive. In addition, Ukrainian prices are traditionally very tied to US Dollar. Apart from various imported goods (including cars, machinery, equipment, raw materials etc), even prices for real-estate in Ukraine are fixed in US Dollars.

According to a survey conducted by HeadHunter, in 2016 most of the companies (around 60%) have managed to increase salaries of their employees (in most cases not more than 20 %) and more than 90% of companies were hiring people in 2016. However, the increase of salary far does not cover the inflation, which amounted to 43,31 % in 2015.

Since the political and economic crisis in Ukraine that started in 2013, lots of companies in Ukraine have decreased number of stuff or even closed down. Apart from reduction in workforce, even those people who managed to keep their jobs felt significant drop of their purchasing power due to the collapse of Ukrainian currency Hryvna (it decreased in 3 times compared to 2013: from 8 UAH / 1 USD in 2013 to 25 UAH / 1 USD in 2016).

According to the State Employment Agency, at present the average unemployment rate in Ukraine is approx. 9.9% among people of active working age.  Around 23% of people are employed unofficially. Currently there is high imbalance between job supply and demand. According to the State Employment Agency of Ukraine, as of 1st of July for 1 position there is 10 candidates on average. The unemployment situation in major metro cities such as Kyiv, Odessa, Kharkiv is slightly better, whereas the highest unemployment is in Ternopil, Kirovograd, Volyn, Donetsk and Lughansk regions.

Ukrainian Government has made number of steps towards elimination of  unofficial employment and increase of salaries of employees. As an example, during 2015, companies who increased salaries of employees for at least 20% (subject to number of extra conditions), could enjoy decreased rate of social security tax. Starting from 2016, companies pay social security tax on each employee’s salary at a fixed rate of 22% from each employee’s salary (compared to 37%, payable on average in 2015). Moreover, under certain conditions, it may be more beneficial for individuals to register as Private Entrepreneurs and make use of the Simplified Tax Regime at a much reduced income tax rate.

Since Soviet times, in order to look for better prospects, a large number of Ukrainians have been going abroad mostly to work in low-grade labor jobs. Especially in Western regions of Ukraine, labor emigration has become an increasingly popular method of coping with poverty and instability in Ukraine. Traditionally the biggest out-flow of Ukrainian workers was to Russia, Italy, Poland, the Czech Republic. However in the last few years due to latest political and economical conflict with Russia and crisis in Russian economy, number of Ukrainian emigrants to Russia has decreased. At the same time, even though there is high demand among Ukrainians for emigration to Europe, European countries tend to implement stricter measures and control of inflow of work force to their territories. Among main reasons are huge inflow of refugees to Europe and economic crisis in some of countries-members of EU.

Latest Developments in Employment

High level of inflation and devaluation of Ukrainian currency led to wide-spread practice to indicate US equivalent among job-seekers. According to Ukrainian law, wages and other payments to Ukrainian employees should be paid in national currency Hryvna (UAH). However, Ukrainian  freelancers can receive payment in foreign currency if paid from overseas. For example, many IT companies use US equivalent when paying salaries to their employees.

On the other side, employers has toughened their requirements to candidates, together with numerous interviewing, candidates have to pass tests and perform preliminary test tasks. Many companies try to fire existing employees who are on higher salaries and then try to recruit new staff on lower salaries.

English language knowledge is improving rapidly in Ukraine. Given the improved English language skills, high quality of workforce in certain sectors and low salary expectations, there is an increasing interest by foreign businesses to recruit qualified candidates from Ukraine.  An increasing number of foreign companies are opening remote offices in Ukraine to support their businesses overseas as well as Ukrainians who work remotely for foreign customers (especially in IT area).